PFI projects 'poor value for money'

Private Finance Initiative deals to pay for new hospitals and schools have been labelled poor value for money by MPs.

The Treasury select committee said the government had become addicted to PFI and that it was no more efficient than other forms of borrowing.

A report from the cross-party committee said the long-term expense of PFI deals, where the private sector bears the upfront cost and is repaid by the taxpayer over a 30-year period, were now much higher than more conventional forms of borrowing.

The report said: “We believe that a financial model that routinely finds in favour of the PFI route, after the significant increases in finance costs in the wake of the financial crisis is unlikely to be fundamentally sound.

“We do not believe that PFI can be relied upon to provide good value for money without substantial reform.”

PFI was introduced by John Major’s Conservative government in 1992 and has been used regularly since as a means of private companies funding public structures.

The committee found little evidence that PFI-funded buildings were of higher quality or more innovative in their design than those procured by other means.

However, Labour has defended its use of the PFI system when it was in government, saying it had been used to deliver hundreds of new public facilities and the biggest ever hospital building programme.

Andrew Tyrie, the Tory MP who chairs the committee, said PFI should only be used where it can be shown that there are clear benefits.